Specifically when a titleholder enters into a lease with another person in the form of a bareboat charter party or bareboat charter then the charterer or lessee is viewed under the law as the owner.
Bareboat charter operating lease. The OWNER agrees to charter the Vessel to the CHARTERER and not to enter into any other agreement for the Charter of the Vessel for the same period. Bareboat Charter means the contract for the lease or sub lease of a vessel for a stipulated period of time by virtue of which the charterer acquires full control and complete possession of the vessel including the right to appoint the master and crew for the duration of the charter but excluding the right to sell or mortgage the vessel. An operating lease may also be structured with a purchase option in favour of the lessee at the end of the charter period but in general risk and reward in the residual value remains with the lessor though we have seen the purchase option terms at the end of some Chinese operating leases being structured in a manner which makes the price of exercising them or the downside of not doing so.
FSL Trust provides leasing services on a bareboat charter basis to the international shipping industry. A bareboat charter is a contractual agreement akin to the lease of a vessel whereby most of the customary liabilities of the owner are shifted to the charterer. In practice a bareboat charter may be an operating lease or a finance lease while an operating lease may be a time charter or bareboat charter.
All other leases are classified as operating leases. Time charters are likely to contain both a lease ie. BARECON is a bareboat charter party.
Other vessels are employed on short- to medium-term time charters or in pools. It is a lease agreement whereby the charterer obtains possession and full control of the ship along with the legal and financial responsibility for it. FSL provides leasing services on a bareboat charter basis to the international shipping industry.
A bareboat charter sometimes called a charter by demise or demise charter particularly by lawyers i is a contract for the hire of a vessel for an agreed period during which the charterers acquire most of the rights of the owners. Right to use the ship and service components ie. Bareboat charters will typically meet the new definition of a lease since under these agreements the charterer controls the use of the ship for a period of time.
If the bareboat charter is characterized as a financial lease for tax purposes the buyers right to claim capital allowances and tax exemption will be lost. It is specified that the lessor will charter the vessel to the charterer on an as is where is basis and on the terms and conditions set out in the bareboat charter. The aviation equivalent is the dry lease which is by far the dominant leasing contract in aviation leasing.